Goodbye Great Recession, hello bedlam

By Michael Moran

NEW YORK—In recent months, as the Great Recession slowly recedes, a wave of geopolitical volatility has washed ashore, especially in the East. Rarely since the end of the Cold War has so large a swath of the Asian continent been so unsettled.

Here’s a roundup of the daunting state of global instability.

From the Mediterranean to the heights of the Himalayas to the oil-rich Pacific seabed, Asia’s rising powers have resurrected long dormant border conflicts. Over the past several months, friction has surged between Japan and China, China and India, China and Vietnam and, most ominously, the United States and China. Adding to the grim picture, the continent’s long-simmering tensions are heating up — on the Korean penninsula; between Israel and Iran over the latter’s secret nuclear program; and in Kashmir’s proxy clash between India and Pakistan.

Meanwhile, Iraq remains violent and without a government after the pruported end to the U.S. combat mission. Israeli and Lebanese forces traded blows in August. So did U.S. and Pakistani forces (less deliberately, one hopes) along the Afghan border, plunging that key relationship to new lows.

Elections in Kyrgyzstan on October 10 are testing the post-coup leadership’s vow to democratize, and a November vote in Myanmar could stir long-repressed expectations and even violence.

China—deliberately or not—drives a good portion of the volatility in its neighborhood, although policymakers elsewhere share some of the blame. Old disputes between China and its neighbors over small islands and territorial waters in the South and East China seas led Beijing to trade angry words with Tokyo and Washington. U.S. talks with Vietnam over a proposed nuclear fueling deal (like the one signed in 2006 with India) also earned Chinese barbs. Meanwhile, Sino-Indian relations have soured over reasserted Chinese claims to the Himalayan state of Arunachal Pradesh, as well as China’s new-found influence in Nepal.

Not all the world’s troubles reside in Asia, however. In Europe and the United States, a pronounced and economically-driven anti-incumbent mood—augmented in some places by populist sentiments—threatens governing parties. The anemic recovery in the U.S. likely will manifest itself in the November 2 midterm elections with a tilt toward the Republicans, a party that itself is shifting towards conservative populism. This will have implications both for economic policy and geopolitics as the populism begins to gnaw away at the GOP’s traditionally free-trade orientation and exerts pressure on the White House to take punitive steps against China.

Meanwhile, Europe’s fiscal and organizational woes are rapidly removing it as a global force in the world. It’s legacy powers—vetos at the U.N. Security Council, generous aid packages, established multinational corporations and enviable “soft power”—will persist for a time. But budget cuts in Britain and France, particularly, where most of the EU’s “out-of-area” footprint originates, suggest a sharp downward trend in global influence.

In the Middle East, on the other hand, a broad realignment of interests and power continues. Europe’s influence, again, is diminishing. The U.S. drawdown in Iraq is giving way to an increased focus on Afghanistan and Pakistan, and to a renewed push on the Israeli-Palestinian front. Meanwhile, Turkey’s profile, particularly among the Sunni masses, continues to grow as it stakes out a more confrontational stance toward Israel and seeks to assert itself as a mediator between the West and Iran. In Tehran, the regime appears to have shrugged off the near-death experience of the 2009 “Green Revolution,” and has increasingly spoken of its ability to strike back hard should Israel or the U.S. launch airstrikes against its nuclear research facilities. However, its covert and overt activities in the region have put the Gulf Arabs on notice, stirring up Shiite dissent in Bahrain and even Kuwait and prompting a record Saudi purchase of U.S. weaponry.

All of it adds up to a minefield of volatility. Those who predict with conviction and confidence on any of these tensions now kid themselves: With so much of the world’s political and economic destiny so intertwined, figuring political risks into any formula at the moment is by definition a matter of educated guesses.